How to guide clients who have suffered through trauma to reach their financial goals

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Naveen Senthamilselvan often observes clients setting financial goals motivated by fear rather than by what they want to achieve. It’s a behaviour that’s among the first signs of trauma, he says, and one that’s becoming increasingly more common in today’s economic climate.

“Some clients’ self-limiting beliefs are deeply entrenched and based on traumatic past experiences, abuses, or the breakdown of a relationship,” says Mr. Senthamilselvan, director of strategic initiatives and business planning at Meridian Credit Union in Pickering, Ont.

“But today we’re also seeing a large group of people battling situational financial fear due to the combined impact of the pandemic, poor market performance and the uncertainty around rising interest rates and the economy.”

A similar scenario played out in 2008 when individuals who invested prior to the global financial crisis later sold everything in a panic during the crash, he says.

“That scenario is now playing out again as distrust in the market is creating financial paralysis, fear-based selling and other financial decisions that could lead people to miss out on future growth and recovery gains,” Mr. Senthamilselvan says.

Current market conditions aside, a 2021 Meridian CU survey uncovered a further layer of complexity affecting people’s relationships with money. About 55 per cent of survey participants still have financial hang-ups from childhood that impact their decisions around money to this day.

“Even talking about money can be very hard for many people,” Mr. Senthamilselvan says.

“The surveys show that a lot of Canadians feel shame around their financial decisions. And sometimes, that may make them wait years before finally seeking the support of a professional financial advisor.”

Financial behaviours linked to trauma

Any kind of trauma – no matter the cause – can impact people’s sense of safety and worth, which is what money represents in society, says Chantel Chapman, founder and chief executive officer of an online financial literacy program called The Trauma of Money Method in Vancouver.

Ms. Chapman trains financial advisors regularly on integrating a more trauma-aware approach into their work. This involves identifying, depersonalizing and deactivating the narratives learned from trauma that cause unhelpful behaviors or shame.

Some financial behaviours linked to trauma include not negotiating contracts or raises, overspending on items for social acceptance, excessive risk aversion, workaholism, or not advocating for one’s financial needs, she says.

“When clients feel seen and heard by their advisor, they’re more likely to increase their ability to move out of scarcity thinking and into a place where they have more access to their executive decision-making, impulse control and fluid intelligence,” Ms. Chapman says.

“These are all traits that impact financial decisions positively.”

Allowing clients to regain control

Many abuse survivors don’t have a sense of themselves in the future, which can affect their willingness or ability to plan, says Betty-Anne Howard, financial advisor at Assante Financial Management Ltd. in Kingston, Ont.

Ms. Howard, who worked as a clinical therapist with trauma survivors before joining Assante, says it’s essential to offer choices that allow clients to regain some control over their lives.

“It’s not a good idea to start telling the client what to do, which historically is how many financial advisors have done their jobs,” she says.

“Many survivors of domestic abuse have come to believe they’re unworthy of anything. Any hopes and dreams for a good life have dissolved along with their confidence in managing their finances because they’ve been told they aren’t any good at it, which is why the abuser has often been controlling the money.”

Advisors can help clients recognize that they do have those skills by offering sincere support and words of encouragement such as, “of course, you feel this way” and “you can take steps to make your life better.” This takes the stigma away and helps normalize their feelings, says Ms. Howard.

“Ask respectfully if they understand what you are saying and if they have any questions,” she says.

“It’s very easy for survivors of trauma to disassociate and nod their heads; meanwhile, they’re no longer present in the meeting with you.”

Advisors need to recognize when that happens and check in by asking clients: “What’s going on for you?” she adds.

Tailoring advice to improve finances

As with any relationship, trust builds over time. Helping clients accept they are not to blame for their financial past and that they are not alone is critical to helping them move forward, says Mr. Senthamilselvan.

Men, in particular, who have gone through financial trauma may feel extra pressure to ensure their family is financially secure and that it never happens again.

“This may result in wanting to have a lot more in savings to protect against any unforeseen issues,” he says.

“Depending on how they were raised culturally and how money was discussed in their household growing up, men may also hold onto limiting financial beliefs about going it alone instead of reaching out for help and support when they need it.”

Being able to better understand clients’ inner feelings about money has helped Mr. Senthamilselvan tailor his advice to effectively improve their finances.

As clients begin to recognize the ways in which they’ve been limiting their financial potential, they start building momentum at a rate that is comfortable for them.

“It’s incredibly gratifying to support a client as they save for a down payment for their first home, set up investments to fund their kids’ future education, or start a business they’ve been dreaming about,” he says.

“We help them evolve their financial journeys in a way that supports their values and life goals.”

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